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By Ryan Kennelly

August 27, 2020

Topics:

  • Life Insurance
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What is Term Life Insurance?

August 27, 2020

  • Life Insurance

What is Term?

Term Life Insurance gives you coverage for a fixed number of years, for example 10, 15, 20, or 30 years varies based on the plan and the insurance carriers you choose. Typically Term Life Insurance is Cheaper, in other words have lower premium than Whole Life Insurance. Term Insurance is commonly purchased to protect a major debt like Mortgage, company, business, or other estate.

Life Insurance Quotes

Term Life Insurance could be Level Term or Decreasing Term:

  • Level Coverage: The face amount, or the death benefit is fixed from day 1 till end of term. The premium payments are fixed through the term of coverage.
  • Decreasing Term: The face amount or death benefit decreases from day 1 to value of 0 by end of term. Decreasing Term Insurance plans are primarily used to protect the beneficiary from facing financed long term debt upon the death of the insured. The premium (monthly, quarterly, annually) is the same throughout the term of coverage. Premiums for Decreasing Term are usually cheaper (less) than level term.

Example: 

John is 33 years old married to Betty who is 30 years old. They bought a house accumulating a mortgage of $300,000 on 30 years payments. John purchased a 30 years Term Life Insurance policy with a coverage amount of $400,000. John’s rationale is to get protect his wife Betty from paying the mortgage debt on her own in case of his death.

Betty, on the other hand, purchased a policy to protect John as a beneficiary. In case of Betty’s death within the 30 years term, John would have coverage to pay the mortgage.

There are many factors that play a role when choosing between Term Life and Whole Life insurance. Primarily based on need, budget, age, and risks. You can reference to Term vs Whole Life to learn more about the differences.

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